Full Judgment Text
2026 INSC 309
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23415 of 2025)
J. SRI NISHA ….APPELLANT(S)
VERSUS
THE SPECIAL DIRECTOR,
ADJUDICATING AUTHORITY,
DIRECTORATE OF
ENFORCEMENT AND ANR. ….RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 34269 of 2025)
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23416 of 2025)
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23417 of 2025)
J U D G M E N T
Mehta, J.
1. Heard.
2. Leave granted.
Signature Not Verified
Digitally signed by
SHIPRA NARANG
Date: 2026.04.02
10:08:02 IST
Reason:
1
3. This batch of appeals arises out of the common
rd
judgment and final order dated 23 July, 2024
passed by the Division Bench of the High Court of
1
Judicature at Madras in W.A. Nos.3520 to 3524 of
2023 and C.M.P. Nos.28745, 28749, 28748, 28750,
28756 of 2023 and 2240 of 2024.
4. The appellants herein had approached the
learned Single Judge of the High Court, assailing the
2 nd
order/show cause notice dated 22 December, 2021
issued by the Adjudicating Authority under the
provisions of the Foreign Exchange Management Act,
3 th
1999 , and the consequential corrigendum dated 13
March, 2023.
5. The writ petitions instituted by the appellants
assailing the said SCN and corrigendum came to be
dismissed by the learned Single Judge vide common
th
final order dated 30 November, 2023. The intra-
Court appeals preferred against the said order also
rd
stand rejected by the impugned judgment dated 23
July, 2024. It is in these circumstances that the
1
Hereinafter, referred to as the “High Court”.
2
For short, ‘SCN’.
3
For short, ‘FEMA’.
2
appellants are before us by way of these appeals with
special leave.
6. Since all the appeals involve identical questions
of fact and law, they were heard analogously and are
being decided by this common judgment.
Background: -
7. The appellants herein are the Company named
M/s. Accord Distilleries & Breweries Pvt. Ltd. and its
Directors. The allegations against the appellants in
the questioned SCN emanate from a transaction of
acquisition of 70 lakh shares of an entity named M/s.
Silver Park International Pte. Ltd., a Singapore based
Company, registered as per the laws of Singapore and
subsequent transfer/distribution of these shares.
8. The transactions referred to above triggered the
proceedings for violation of provisions of FEMA
against the appellants herein. The foundational facts
of these proceedings are that the appellant in Civil
Appeal @ SLP (C) No.34269 of 2025, J. Sundeep
Anand, an Indian citizen, being the Director of M/s.
Accord Distilleries & Breweries Pvt. Ltd. had
subscribed to and acquired shares/foreign securities
(without consideration) in M/s. Silver Park
International Pte. Ltd. allegedly without the requisite
3
4
approval of the Reserve Bank of India and in
violation of the provisions of the Foreign Exchange
Management (Transfer or Issue of any Foreign
5
Security) Regulations, 2004 . The said shares were
subsequently transferred to the other appellants,
who are the wife and children of J. Sundeep Anand,
also without the requisite regulatory approval.
Consequently, the appellants were alleged to have
contravened the provisions of Section 4 of FEMA,
read with the aforesaid Regulations, on the premise
that they had acquired and held shares of a foreign
entity without the requisite approval and in violation
of the statutory framework. As a result, the
Authorised Officer seized the properties of the
th
appellants vide order dated 11 September, 2020
under Section 37A(1) of FEMA.
9. Pursuant to the initiation of proceedings, the
6
Authorised Officer-respondent No.2 herein,
resorting to the procedure provided under Section
37A(2) of FEMA moved the Competent Authority, ,
i.e.
4
For short, ‘RBI’.
5
For short, ‘FEMA Rules’.
6
Hereinafter, referred to as the “Authorised Officer”.
4
the Commissioner of Customs (Appeals-I), for seizure
of the assets of the appellants herein.
10. The Competent Authority, exercising powers
under Section 37A(3) of FEMA after due
consideration of the material placed before it, came
to a conclusion that there was no proof that any of
the appellants had ever paid for the shares floated by
M/s. Silver Park, since the said company never made
a call for the same. Consequently, no contravention
of Section 4 was made out, and the provisions of
Section 37A were held to be inapplicable.
Accordingly, the prayer for confirmation of seizure of
rd
assets was rejected vide a detailed order dated 3
February, 2021. The said order is presently under
challenge at the instance of the Directorate of
Enforcement before the Appellate Tribunal under
SAFEMA at New Delhi in FPA-FE No. 33/CHN/2021.
11. Parallelly, with the proceedings for seizure and
on identical set of allegations, the Authorised Officer,
7
moved the Adjudicating Authority-respondent No. 1
herein (the Special Director of Enforcement
Directorate) under Section 16(3) of FEMA, pursuant
7
Hereinafter, referred to as the “Adjudicating Authority”.
5
nd
whereto an SCN dated 22 December, 2021 was
issued to the appellants alleging violation of the
provisions of FEMA along with allied regulations. The
appellants appeared before the Adjudicating
Authority in response to the SCN and advanced
preliminary as well as additional submissions during
the course of the proceedings. After the personal
hearing was concluded and the matter was reserved
for orders by the Adjudicating Authority, a
th
corrigendum dated 13 March, 2023 came to be
issued to the SCN. Both the SCN as well as the
corrigendum were subjected to challenge in the writ
petitions filed by the appellants before the learned
Single Judge of the High Court.
12. The foundational challenge to the SCN and the
corrigendum was that once the Competent Authority
had recorded categoric findings of lack of basis for
seizure in the order made under Section 37A(3) of
FEMA, rejecting the prayer for confirmation of seizure
of assets, there was no tangible material in the hands
of the authorities to conclude that the appellants had
violated Section 4 of FEMA. The very essence of the
SCN stood struck off with the order passed by the
Competent Authority under Section 37A(3) of FEMA,
6
and hence, the SCN was non est in the eyes of law.
The writ petitions were rejected by the learned Single
th
Judge by order dated 30 November, 2023, and the
intra-court appeals preferred against the said order
were also dismissed by the Madras High Court by
rd
judgment dated 23 July, 2024, which are the
subject matter of challenge in these appeals by
special leave.
Submissions on behalf of the appellants: -
13. Mr. Siddharth Luthra and Mr. Harin P. Raval,
learned senior counsel representing the appellants,
vehemently and fervently contended that once the
Competent Authority had concluded in the
proceedings under Section 37A of FEMA that there
was no ground to confirm the seizure of the assets of
the appellants herein, the very foundation of the SCN
stood effaced. In those circumstances, the SCN was
fit to be quashed in exercise of the writ jurisdiction
under Article 226 of the Constitution of India because
the foundational facts for sustaining the said SCN
proceedings were lacking.
14. It was further submitted that the order of the
rd
Competent Authority dated 3 February, 2021
refusing to confirm the seizure of the assets has been
7
passed in favour of the appellants and that the appeal
against the said order at the instance of the
respondent (Directorate of Enforcement) is still
pending adjudication before the Appellate Tribunal
under SAFEMA at New Delhi in FPA-FE No.
33/CHN/2021. Under these circumstances, the
outcome of the said appeal ought to have been
awaited before issuance of the SCN.
15. Learned senior counsel further pointed out that
the plea of the respondents that the appellants have
concealed the factum of the SCN having been finally
adjudicated is wholly misconceived, inasmuch as, in
the pleadings of the civil appeals, the appellants have
clearly mentioned that the SCN culminated into a
final order against which statutory appeal(s) have
also been preferred.
16. Learned senior counsel submitted that the
findings recorded by the Division Bench of the High
Court in para Nos.32, 33, and 34 of the impugned
order, virtually setting at nought the order passed by
the Competent Authority under Section 37A of FEMA,
have prejudiced the case of the appellants because
the Adjudicating Authority has heavily relied upon
8
these very observations while passing the final
adjudication order.
17. Learned senior counsel further submitted that
it is a fit case in which this Court should feel
persuaded to quash the SCN along with the
th
corrigendum and the adjudication order dated 26
August, 2024 as there existed no foundation for the
same.
18. Their alternative submission was that the order
th
of adjudication dated 26 August, 2024 deserves to
be set aside and the respondents should be directed
to await the outcome of the appeal pending under
Section 19 of FEMA before the SCN can be
adjudicated on merits. They further prayed that the
observations and adverse findings recorded by the
Division Bench on the order passed by the Competent
Authority under Section 37(A)(3) of FEMA should not
prejudice the case of the appellants at any stage of
the proceedings.
Submissions on behalf of the respondents: -
19. Per contra , Mr. Anil Kaushik, learned Additional
Solicitor General representing the respondents,
strenuously, arduously, and vociferously opposed the
submissions advanced by the appellants’ counsel. He
9
urged that the nature of proceedings under Section
37A of FEMA is intermediary/interim in nature and
has no bearing on the adjudication of the SCN.
20. He further submitted that irrespective of the
outcome of the appeal against the order under
Section 37A of FEMA, the Adjudicating Authority has
independent jurisdiction to decide the show cause
proceedings on its own merits, and the appellants
cannot seek any advantage from the fact that the
Competent Authority has not confirmed the seizure.
21. He referred to sub-section (4) of Section 37A to
buttress the contention that the adjudication
proceedings are independent of the seizure
proceedings to urge that the High Court was
absolutely justified in observing that the findings
recorded in the order passed by the competent
authority in proceedings under Section 37A would
have no bearing on the outcome of the adjudication
proceedings.
22. He emphasized that the appellants have
concealed the fact of the final order having been
passed pursuant to the SCN and hence, they do not
deserve any indulgence in these matters.
10
Discussion and Analysis
23. We have considered the submissions advanced
by learned counsel for the parties and have gone
through the impugned orders. We have also carefully
perused the statutory framework governing the
dispute at hand.
24. Before we delve into the merits of the case, it is
necessary to deal with the preliminary objection
raised on behalf of the respondents that the
appellants had suppressed the fact that a final
adjudication order had been passed pursuant to the
SCN and, for that reason, they do not deserve any
indulgence in the present proceedings. Upon a
consideration of the record, we find no merit in the
said contention. There is nothing to indicate any
deliberate concealment or lack of candour on the part
of the appellants so as to disentitle them from seeking
relief. On the contrary, the pleadings in the civil
appeals clearly manifest that the SCN had
culminated in a final adjudication order, against
which statutory appeal(s) have also been preferred.
The allegation of suppression is thus wholly
11
misconceived and does not furnish a ground to non-
suit the appellants.
25. Now, we shall advert to the merits of the case.
For the ease of reference, Section 37A of FEMA on
which the fulcrum of the controversy lies, is
reproduced hereinbelow: -
“37-A. Special provisions relating to assets held
outside India in contravention of Section 4.—
(1) Upon receipt of any information or otherwise,
if the Authorised Officer prescribed by the Central
Government has reason to believe that any foreign
exchange, foreign security, or any immovable
property, situated outside India, is suspected to
have been held in contravention of section 4, he
may after recording the reasons in writing, by an
order, seize value equivalent, situated within
India, of such foreign exchange, foreign security
or immovable property: Provided that no such
seizure shall be made in case where the aggregate
value of such foreign exchange, foreign security or
any immovable property, situated outside India, is
less than the value as may be prescribed.
(2) The order of seizure along with relevant
material shall be placed before the Competent
Authority, appointed by the Central Government,
who shall be an officer not below the rank of Joint
Secretary to the Government of India by the
Authorised Officer within a period of thirty days
from the date of such seizure. (
12
(3) The Competent Authority shall dispose of the
petition within a period of one hundred eighty
days from the date of seizure by either confirming
or by setting aside such order, after giving an
opportunity of being heard to the representatives
of the Directorate of Enforcement and the
aggrieved person. Explanation.—While computing
the period of one hundred eighty days, the period
of stay granted by court shall be excluded and a
further period of at least thirty days shall be
granted from the date of communication of
vacation of such stay order.
(4) The order of the Competent Authority
confirming seizure of equivalent asset shall
continue till the disposal of adjudication
proceedings and thereafter, the Adjudicating
Authority shall pass appropriate directions in the
adjudication order with regard to further action as
regards the seizure made under sub-section (1):
Provided that if, at any stage of the
proceedings under this Act, the aggrieved person
discloses the fact of such foreign exchange,
foreign security or immovable property and brings
back the same into India, then the Competent
Authority or the Adjudicating Authority, as the
case may be, on receipt of an application in this
regard from the aggrieved person, and after
affording an opportunity of being heard to the
aggrieved person and representatives of the
Directorate of Enforcement, shall pass an
appropriate order as it deems fit, including setting
aside of the seizure made under sub-section (1).
(5) Any person aggrieved by any order passed by the
Competent Authority may prefer an appeal to the
Appellate Tribunal.
13
(6) Nothing contained in Section 15 shall apply to this
section.”
[Emphasis supplied]
26. A perusal of the aforesaid provision would
clearly indicate that the same has been enacted in
order to ensure that the assets of a person suspected
to be involved in foreign exchange or foreign security
violations may be seized to the extent equivalent to
such foreign exchange or foreign security, which may
be under scrutiny of the Adjudicating Authority.
27. Hence, the provision is in nature of a preventive
measure for ensuring that the assets equivalent to
the foreign exchange or foreign security may be kept
secured for future proceedings pursuant to
adjudication.
28. Sub-section (4) gives an impression that the
order passed by Competent Authority confirming the
seizure would remain alive only till the disposal of the
adjudication proceedings, and that the Adjudicating
Authority would be authorized to proceed with
further action, SCN, etc. without being fazed by
i.e.,
the confirmation of the seizure proceedings.
29. The effect of sub-section (4) is evidently to leave
the seized assets at the disposal of the Adjudicating
14
Authority for realisation of the adjudicated amount,
if any and to prevent frustration of the adjudication
order. However, sub-section (4) is restricted to an
order of the Competent Authority “ confirming seizure
of equivalent assets and the continuance thereof till
the disposal of the adjudication proceedings” . The
said provision literally does not deal with a situation
where the seizure has not been confirmed.
30. The controversy in the present cases is more
appropriately examined within the framework of sub-
sections (1) to (3) of Section 37A. A plain reading of
Section 37A(1) indicates that the power of seizure is
predicated upon the existence of a “reason to believe”
that foreign exchange, foreign security or immovable
property situated outside India is suspected to have
been held in contravention of Section 4. Such
satisfaction by the Authorised Officer at the stage of
preliminary seizure under Sub-section (1) is only
tentative and is expressly subject to scrutiny under
Sub-sections (2) and (3), wherein the Competent
Authority is required to independently examine
whether the reasons recorded justify continuation of
the seizure. The exercise undertaken by the
Competent Authority is thus not an empty formality,
15
but a substantive evaluation of whether the material
on record is sufficient to sustain even a prima facie
inference of contravention in relation to foreign
exchange. In the present case, upon such evaluation,
the Competent Authority declined to confirm the
seizure by a well-reasoned order, thereby indicating
that the material did not meet even this preliminary
threshold. The refusal to confirm the seizure,
therefore, reflects a considered finding that the
foundational requirement of a “reason to believe” was
not satisfied on the material available.
31. For the sake of convenience, the reasons
rd
recorded in the order dated 3 February, 2021,
whereby the Competent Authority refused to confirm
the seizure made under Section 37A(1) are extracted
below: -
“In this case none of the respondents i.e., R1
to R4 were holding any foreign security having a
value at any point of time. The subscribed shares
remained only in paper for the time being. None of
the documentary evidences in this matter have been
countered by the enforcement directorate. The
Enforcement Directorate has not proved by way of
evidence that the money indicated in the
"subscribed shares" have been paid either "legally or
illegally". As held by the Hon'ble SC, in the above
cited case law, the suspicion must be reasonable i.e.
have a degree of objectivity and basis/foundation for
16
the suspicion must be based on 'certain reasons'. In
my considered opinion, unless it is shown by the
investigating department that. "something" was
"held" in contravention of Section 4 of FEMA, Section
37A(1) will not come into play. In this case no share
of any value was held in Singapore. Therefore
suspicion has no foundation. As the department.
has failed to prove, Section 37A (1) of FEMA, 1999
cannot be invoked to seize the properties owned by
Mr. S. Jagathrakshakan (R1), Ms. Anusuya
Jagathrakshakan (R2), Ms. Sri Nisha (R3) & Mr.
Sundeep Aanand (R4). Therefore, the prayer made
by the authorised officer vide petition dated
05.10.2020 under Section 37A(2) to confirm the
seizure of properties as mentioned in the Annexures
A, B, C & D of the Order of Seizure dt.11.09.2020 is
rejected and the impugned Order of Seizure is set
aside.”
32. Thus, a prima facie satisfaction was recorded by
the Competent Authority that there was no evidence
of the appellants being involved in foreign security
transactions having any value. Consequently, it has
to be taken that there did not exist the “reasons to
believe” referred to in Sub-section (1) of Section 37A.
These findings definitely support the cause of the
appellants herein. It is not in dispute that the appeal
preferred by the Department against the order dated
rd
3 February, 2021, is still pending consideration.
The Division Bench of the High Court, while deciding
the writ appeal, observed that the writ petition
17
against the SCN is not entertainable. We feel that the
said observation may not be correct in every
situation. This Court has consistently held that
although ordinarily a writ petition against an SCN
may not be entertained, however, the said
proposition is not an inviolable rule. Interference at
the stage of SCN is permissible in exceptional
circumstances, such as where the notice suffers from
patent lack of jurisdiction, reflects non-application of
mind, is issued with a pre-determined or
premeditated approach, amounts to an abuse of the
process of law, or results in a violation of the
principles of natural justice. In such situations, the
High Court would be justified in exercising its
jurisdiction under Article 226 of the Constitution to
prevent manifest injustice. In this context, we may
gainfully refer to the following observations from
8
Union of India v. VICCO Laboratories : -
“ 31. Normally, the writ court should not interfere at
the stage of issuance of show-cause notice by the
authorities. In such a case, the parties get ample
opportunity to put forth their contentions before the
authorities concerned and to satisfy the authorities
concerned about the absence of case for proceeding
against the person against whom the show-cause
8
(2007) 13 SCC 270 : 2007 SCC OnLine SC 1420
18
notices have been issued. Abstinence from interference
at the stage of issuance of show-cause notice in order
to relegate the parties to the proceedings before the
authorities concerned is the normal rule. However, the
said rule is not without exceptions. Where a show-
cause notice is issued either without jurisdiction or
in an abuse of process of law, certainly in that case,
the writ court would not hesitate to interfere even
at the stage of issuance of show-cause notice. The
interference at the show-cause notice stage should be
rare and not in a routine manner. Mere assertion by
the writ petitioner that notice was without jurisdiction
and/or abuse of process of law would not suffice. It
should be prima facie established to be so. Where
factual adjudication would be necessary, interference
is ruled out.”
[Emphasis supplied]
33. Thus, the rejection of challenge laid by the
appellants to the SCN on the ground of non-
maintainability was not justified in the peculiar facts
of the case at hand.
34. We shall now advert to the observations made
by the Division Bench that the interim seizure under
Section 37A may not have any implication in respect
of the final order to be passed by the Adjudicating
Authority, and that it would be apposite for such
authority to deal with the effect and import of the
seizure order passed by the Authorised Officer under
Section 37A of FEMA while passing the final order
19
under Section 16 of FEMA. Further, in para 34, the
High Court again referred to the seizure made under
sub-section (1) and directed the Adjudicating
Authority to take note of the said provision. For ease
of reference, paras 32, 33, and 34 of the impugned
order are reproduced hereinbelow: -
“32. Therefore, the very purpose and object of
inserting Section 37A is to seize value equivalent
situated within India of such foreign exchange,
foreign security or immovable property during
pendency of the adjudication proceedings and such
seizer proceedings initiated under Section 37A,
undoubtedly cannot stand as a bar to proceed with
the adjudication proceedings under Section 16 of the
FEMA by the Adjudicating Authority. As noted under
the definition, the functions of the Adjudication
Authority, Authorised Officer and Competent
Authority are distinguishable and each Authority is
conferred with powers under the Act to carry out
certain actions. Therefore, the contention on behalf
of the appellants that the Authorised Officer is below
the Competent Authority has no relevance as far as
Section 37A of FEMA is concerned
33. In fine, we could arrive at an irresistible
conclusion that a writ against a show cause notice
is not entertainable. The adjudication proceedings
have completed and the final order is about to be
passed by the Adiudicating Authority. Regarding an
interim seizure under Section 37A is concerned, it
may not have any implication in respect of the final
order to be passed by the Adjudicating Authority and
it would be appropriate on his part to deal with the
effect of seizure order passed by the Authorised
20
Officer under Section 37A of FEMA, while passing
final order under Section 16 of FEMA.
34. The above position has been amply made clear
in Sub Section (4) to Section 37A of the Act, wherein,
it is contemplated that the Adjudicating Authority
shall pass appropriate directions in the adjudication
order with regard to further actions as regards to
seizer made under Sub Section (1) to Section 37A
and in this case, the Adjudicating Authority is
directed to take note of said provision and take an
appropriate decision with reference to the order
passed by the Authorised Officer under Section
37A(1) of the FEMA.”
35. On a bare perusal of the aforesaid observations,
we find that the High Court repeatedly referred to the
effect of the seizure order passed by the Authorised
Officer under Section 37A of FEMA and the scope of
consideration thereof by the Adjudicating Authority
while passing the final order under Section 16. We
may note that the observations (supra) made by the
Division Bench impliedly efface the findings recorded
by the Competent Authority while refusing to confirm
the seizure, thereby foreclosing the outcome of the
appeal pending before the appellate authority.
36. The High Court referred to sub-section (4) of
Section 37A as if it were concluding that the
seizure had been confirmed, whereas the factual
situation reads otherwise. In case the finding of the
21
Competent Authority refusing to confirm the seizure
for substantive reasons stands affirmed in appeal,
manifestly, the same would have a bearing on the
outcome of the adjudication proceedings.
37.
The Adjudicating Authority, while passing the
final order under Section 16 of FEMA, extensively
referred to and relied upon the aforesaid observations
of the Division Bench. The relevant conclusions from
th
the adjudication order dated 26 August, 2024 are
reproduced hereinbelow for ease of reference: -
“…..
(iii) The above analysis was strengthened by the
Hon'ble High Court of Madras in judicial
pronouncement dated 30.11.2023 in the matter of
Writ Petitions in WP Nos. 21105/2023,
21359/2023, 21100/2023, 21096/2023 and
21102/2023, filed by the Noticees against the
Adjudicating Authority, and as such, the Hon'ble
High Court was pleased to dismiss the Writ Petitions
(iv) The Noticees preferred Writ Appeal against the
order of Hon'ble High Court of Madras in the above
WPs. The Division Bench of Hon'ble High Court of
Madras vide its order dated 23.07.2024 in the Writ
Appeals in WA No.s 3520 to 3524 of 2023 has
observed that:
"31. We concur with the learned Additional
Solicitor General of India, in view of the fact
that the special provision under Section 37A is
all about an interim seizer value equivalent
situated within in India of such foreign
22
exchange, foreign security or immovable
property. In the event of seizer during the
pendency of the adjudication proceedings, the
procedures to be followed by the authority are
enumerated under Sub Section (6) of Section
37A of FEMA.
32. Therefore, the very purpose and object of
inserting Section 37A is to seize value
equivalent situated within India of such foreign
exchange, foreign security or immovable
property during pendency of the adjudication
proceedings and such seizer proceedings
initiated under Section 37A, undoubtedly
cannot stand as a bar to proceed with the
adjudication proceedings under Section 16 of
the FEMA by the Adjudicating Authority. As
noted under the definition, the functions of the
Adjudication Authority, Authorized Officer and
Competent Authority are distinguishable and
each Authority is conferred with powers under
the Act to carry out certain actions. Therefore,
the contention on behalf of the appellants that
the Authorised Officer is below the Competent
Authority has not relevance as far as Section
37A of FEMA is concerned."
As such, the Division upheld the Single Bench
Order of Hon'ble High Court of Madras on
23.07.2024 and dismissed the Writ Appeals.
(v) …..
(vi) The Competent Authority has passed an
Order setting aside the Seizure Order dated
11.09.2020, vide his order Petition No. 01/2021
dated 03.02.2021. Having perused the said
order of the Competent Authority, I find that
Section 4 of FEMA has been mis-interpreted
holding that the terms acquire, hold, own,
23
possess or transfer of foreign security were only
in respect of paid-up shares. I find that the
Competent Authority has not considered the
observations from the Financial Statement of
the overseas entity, showing the shares as fully
paid-up. In terms of Section 4 of FEMA, the act
of holding of foreign security is sufficient, and
it does not mandate that the foreign securities
are necessarily paid up. FEMA defines the term
"Direct Investment Outside India" that the
investment means by way of contribution to the
capital or subscription to the Memorandum of
Association of a Foreign entity or by way of
purchasing existing shares of a foreign
entity...... However, in the case on hand, during
the impugned period the Noticees were holding
shares of M/s. Silver Park International Pte. Ltd.
Singapore, and also that the said shares were
fully paid-up.
(vii) It is observed from the Reserve Bank of India -
Frequently Asked Questions, that RBI while
clarifying "whether an Indian Party/resident Indian
acquire shares of a Foreign entity without upfront
payment or on deferred payment basis" clarified that
"No. The provisions of Notification No. FEMA
120/RB-2004 dated July 7th 2004 as amended from
time to time, do not permit acquisition of foreign
shares without payment or deferred payment basis."
In view of the above, it is obvious that the Noticees
have acquired Foreign Shares of M/s. Silver Park
International Pte. Ltd. without obtaining prior RBI
approval to make Direct investment outside India.
From the above, it is obvious that the Noticees have
acquired and held foreign shares in violation of
Section 4 of FEMA.
24
(viii) However, I find that the Competent
Authority, without considering the above
statutory stand points, has passed Order setting
aside the Seizure Order of the Authorized
Officer. Therefore, I do not concur with the order
of the Competent Authority. As such, I find that
the impugned seized properties are in
accordance with the provisions of Section 37A
of FEMA .”
[Emphasis supplied]
38. In effect, the Adjudicating Authority has undone
the order of the Competent Authority even while the
appeal against the said order is pending. Such a
course of action, in the opinion of this Court,
tantamounts to abdicating the powers of the
Appellate Authority, even when the order of the
Competent Authority was still under challenge in
appeal at the instance of the department.
39. In wake of the above discussion, we are of the
rd
opinion that the impugned order dated 23 July,
2024 passed by the Division Bench of the High Court
and so also the order of the learned Single Judge of
th
the High Court dated 30 November, 2023, rejecting
the writ petition preferred by the appellants and as
th
a consequence, the final order dated 26 August,
2024 passed by the Adjudicating Authority imposing
penalty and ordering confiscation of the property held
25
by appellants are declared to be arbitrary and
contrary to law. The same are hereby set aside. The
proceedings are revived from the stage of the SCN.
40. As an upshot, we provide that the Appellate
Authority shall first decide the appeal preferred by
the Department against the order of the Competent
Authority under Section 37A(5) of FEMA after hearing
the parties and by passing a reasoned order within a
period of two months from today. Pursuant to the
disposal of the appeal pending before the Appellate
Authority, the proceedings arising out of the SCN
may be commenced and shall be taken to their logical
conclusion without being prejudiced by any of the
observations made hereinabove or in the orders
passed by the High Court.
41. The appeals are disposed of in these terms.
42. Pending application(s), if any, shall stand
disposed of.
….……………………J.
(VIKRAM NATH)
...…………………….J.
(SANDEEP MEHTA)
NEW DELHI;
APRIL 01, 2026.
26
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23415 of 2025)
J. SRI NISHA ….APPELLANT(S)
VERSUS
THE SPECIAL DIRECTOR,
ADJUDICATING AUTHORITY,
DIRECTORATE OF
ENFORCEMENT AND ANR. ….RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 34269 of 2025)
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23416 of 2025)
CIVIL APPEAL NO(S). OF 2026
(Arising out of SLP(Civil) No(s). 23417 of 2025)
J U D G M E N T
Mehta, J.
1. Heard.
2. Leave granted.
Signature Not Verified
Digitally signed by
SHIPRA NARANG
Date: 2026.04.02
10:08:02 IST
Reason:
1
3. This batch of appeals arises out of the common
rd
judgment and final order dated 23 July, 2024
passed by the Division Bench of the High Court of
1
Judicature at Madras in W.A. Nos.3520 to 3524 of
2023 and C.M.P. Nos.28745, 28749, 28748, 28750,
28756 of 2023 and 2240 of 2024.
4. The appellants herein had approached the
learned Single Judge of the High Court, assailing the
2 nd
order/show cause notice dated 22 December, 2021
issued by the Adjudicating Authority under the
provisions of the Foreign Exchange Management Act,
3 th
1999 , and the consequential corrigendum dated 13
March, 2023.
5. The writ petitions instituted by the appellants
assailing the said SCN and corrigendum came to be
dismissed by the learned Single Judge vide common
th
final order dated 30 November, 2023. The intra-
Court appeals preferred against the said order also
rd
stand rejected by the impugned judgment dated 23
July, 2024. It is in these circumstances that the
1
Hereinafter, referred to as the “High Court”.
2
For short, ‘SCN’.
3
For short, ‘FEMA’.
2
appellants are before us by way of these appeals with
special leave.
6. Since all the appeals involve identical questions
of fact and law, they were heard analogously and are
being decided by this common judgment.
Background: -
7. The appellants herein are the Company named
M/s. Accord Distilleries & Breweries Pvt. Ltd. and its
Directors. The allegations against the appellants in
the questioned SCN emanate from a transaction of
acquisition of 70 lakh shares of an entity named M/s.
Silver Park International Pte. Ltd., a Singapore based
Company, registered as per the laws of Singapore and
subsequent transfer/distribution of these shares.
8. The transactions referred to above triggered the
proceedings for violation of provisions of FEMA
against the appellants herein. The foundational facts
of these proceedings are that the appellant in Civil
Appeal @ SLP (C) No.34269 of 2025, J. Sundeep
Anand, an Indian citizen, being the Director of M/s.
Accord Distilleries & Breweries Pvt. Ltd. had
subscribed to and acquired shares/foreign securities
(without consideration) in M/s. Silver Park
International Pte. Ltd. allegedly without the requisite
3
4
approval of the Reserve Bank of India and in
violation of the provisions of the Foreign Exchange
Management (Transfer or Issue of any Foreign
5
Security) Regulations, 2004 . The said shares were
subsequently transferred to the other appellants,
who are the wife and children of J. Sundeep Anand,
also without the requisite regulatory approval.
Consequently, the appellants were alleged to have
contravened the provisions of Section 4 of FEMA,
read with the aforesaid Regulations, on the premise
that they had acquired and held shares of a foreign
entity without the requisite approval and in violation
of the statutory framework. As a result, the
Authorised Officer seized the properties of the
th
appellants vide order dated 11 September, 2020
under Section 37A(1) of FEMA.
9. Pursuant to the initiation of proceedings, the
6
Authorised Officer-respondent No.2 herein,
resorting to the procedure provided under Section
37A(2) of FEMA moved the Competent Authority, ,
i.e.
4
For short, ‘RBI’.
5
For short, ‘FEMA Rules’.
6
Hereinafter, referred to as the “Authorised Officer”.
4
the Commissioner of Customs (Appeals-I), for seizure
of the assets of the appellants herein.
10. The Competent Authority, exercising powers
under Section 37A(3) of FEMA after due
consideration of the material placed before it, came
to a conclusion that there was no proof that any of
the appellants had ever paid for the shares floated by
M/s. Silver Park, since the said company never made
a call for the same. Consequently, no contravention
of Section 4 was made out, and the provisions of
Section 37A were held to be inapplicable.
Accordingly, the prayer for confirmation of seizure of
rd
assets was rejected vide a detailed order dated 3
February, 2021. The said order is presently under
challenge at the instance of the Directorate of
Enforcement before the Appellate Tribunal under
SAFEMA at New Delhi in FPA-FE No. 33/CHN/2021.
11. Parallelly, with the proceedings for seizure and
on identical set of allegations, the Authorised Officer,
7
moved the Adjudicating Authority-respondent No. 1
herein (the Special Director of Enforcement
Directorate) under Section 16(3) of FEMA, pursuant
7
Hereinafter, referred to as the “Adjudicating Authority”.
5
nd
whereto an SCN dated 22 December, 2021 was
issued to the appellants alleging violation of the
provisions of FEMA along with allied regulations. The
appellants appeared before the Adjudicating
Authority in response to the SCN and advanced
preliminary as well as additional submissions during
the course of the proceedings. After the personal
hearing was concluded and the matter was reserved
for orders by the Adjudicating Authority, a
th
corrigendum dated 13 March, 2023 came to be
issued to the SCN. Both the SCN as well as the
corrigendum were subjected to challenge in the writ
petitions filed by the appellants before the learned
Single Judge of the High Court.
12. The foundational challenge to the SCN and the
corrigendum was that once the Competent Authority
had recorded categoric findings of lack of basis for
seizure in the order made under Section 37A(3) of
FEMA, rejecting the prayer for confirmation of seizure
of assets, there was no tangible material in the hands
of the authorities to conclude that the appellants had
violated Section 4 of FEMA. The very essence of the
SCN stood struck off with the order passed by the
Competent Authority under Section 37A(3) of FEMA,
6
and hence, the SCN was non est in the eyes of law.
The writ petitions were rejected by the learned Single
th
Judge by order dated 30 November, 2023, and the
intra-court appeals preferred against the said order
were also dismissed by the Madras High Court by
rd
judgment dated 23 July, 2024, which are the
subject matter of challenge in these appeals by
special leave.
Submissions on behalf of the appellants: -
13. Mr. Siddharth Luthra and Mr. Harin P. Raval,
learned senior counsel representing the appellants,
vehemently and fervently contended that once the
Competent Authority had concluded in the
proceedings under Section 37A of FEMA that there
was no ground to confirm the seizure of the assets of
the appellants herein, the very foundation of the SCN
stood effaced. In those circumstances, the SCN was
fit to be quashed in exercise of the writ jurisdiction
under Article 226 of the Constitution of India because
the foundational facts for sustaining the said SCN
proceedings were lacking.
14. It was further submitted that the order of the
rd
Competent Authority dated 3 February, 2021
refusing to confirm the seizure of the assets has been
7
passed in favour of the appellants and that the appeal
against the said order at the instance of the
respondent (Directorate of Enforcement) is still
pending adjudication before the Appellate Tribunal
under SAFEMA at New Delhi in FPA-FE No.
33/CHN/2021. Under these circumstances, the
outcome of the said appeal ought to have been
awaited before issuance of the SCN.
15. Learned senior counsel further pointed out that
the plea of the respondents that the appellants have
concealed the factum of the SCN having been finally
adjudicated is wholly misconceived, inasmuch as, in
the pleadings of the civil appeals, the appellants have
clearly mentioned that the SCN culminated into a
final order against which statutory appeal(s) have
also been preferred.
16. Learned senior counsel submitted that the
findings recorded by the Division Bench of the High
Court in para Nos.32, 33, and 34 of the impugned
order, virtually setting at nought the order passed by
the Competent Authority under Section 37A of FEMA,
have prejudiced the case of the appellants because
the Adjudicating Authority has heavily relied upon
8
these very observations while passing the final
adjudication order.
17. Learned senior counsel further submitted that
it is a fit case in which this Court should feel
persuaded to quash the SCN along with the
th
corrigendum and the adjudication order dated 26
August, 2024 as there existed no foundation for the
same.
18. Their alternative submission was that the order
th
of adjudication dated 26 August, 2024 deserves to
be set aside and the respondents should be directed
to await the outcome of the appeal pending under
Section 19 of FEMA before the SCN can be
adjudicated on merits. They further prayed that the
observations and adverse findings recorded by the
Division Bench on the order passed by the Competent
Authority under Section 37(A)(3) of FEMA should not
prejudice the case of the appellants at any stage of
the proceedings.
Submissions on behalf of the respondents: -
19. Per contra , Mr. Anil Kaushik, learned Additional
Solicitor General representing the respondents,
strenuously, arduously, and vociferously opposed the
submissions advanced by the appellants’ counsel. He
9
urged that the nature of proceedings under Section
37A of FEMA is intermediary/interim in nature and
has no bearing on the adjudication of the SCN.
20. He further submitted that irrespective of the
outcome of the appeal against the order under
Section 37A of FEMA, the Adjudicating Authority has
independent jurisdiction to decide the show cause
proceedings on its own merits, and the appellants
cannot seek any advantage from the fact that the
Competent Authority has not confirmed the seizure.
21. He referred to sub-section (4) of Section 37A to
buttress the contention that the adjudication
proceedings are independent of the seizure
proceedings to urge that the High Court was
absolutely justified in observing that the findings
recorded in the order passed by the competent
authority in proceedings under Section 37A would
have no bearing on the outcome of the adjudication
proceedings.
22. He emphasized that the appellants have
concealed the fact of the final order having been
passed pursuant to the SCN and hence, they do not
deserve any indulgence in these matters.
10
Discussion and Analysis
23. We have considered the submissions advanced
by learned counsel for the parties and have gone
through the impugned orders. We have also carefully
perused the statutory framework governing the
dispute at hand.
24. Before we delve into the merits of the case, it is
necessary to deal with the preliminary objection
raised on behalf of the respondents that the
appellants had suppressed the fact that a final
adjudication order had been passed pursuant to the
SCN and, for that reason, they do not deserve any
indulgence in the present proceedings. Upon a
consideration of the record, we find no merit in the
said contention. There is nothing to indicate any
deliberate concealment or lack of candour on the part
of the appellants so as to disentitle them from seeking
relief. On the contrary, the pleadings in the civil
appeals clearly manifest that the SCN had
culminated in a final adjudication order, against
which statutory appeal(s) have also been preferred.
The allegation of suppression is thus wholly
11
misconceived and does not furnish a ground to non-
suit the appellants.
25. Now, we shall advert to the merits of the case.
For the ease of reference, Section 37A of FEMA on
which the fulcrum of the controversy lies, is
reproduced hereinbelow: -
“37-A. Special provisions relating to assets held
outside India in contravention of Section 4.—
(1) Upon receipt of any information or otherwise,
if the Authorised Officer prescribed by the Central
Government has reason to believe that any foreign
exchange, foreign security, or any immovable
property, situated outside India, is suspected to
have been held in contravention of section 4, he
may after recording the reasons in writing, by an
order, seize value equivalent, situated within
India, of such foreign exchange, foreign security
or immovable property: Provided that no such
seizure shall be made in case where the aggregate
value of such foreign exchange, foreign security or
any immovable property, situated outside India, is
less than the value as may be prescribed.
(2) The order of seizure along with relevant
material shall be placed before the Competent
Authority, appointed by the Central Government,
who shall be an officer not below the rank of Joint
Secretary to the Government of India by the
Authorised Officer within a period of thirty days
from the date of such seizure. (
12
(3) The Competent Authority shall dispose of the
petition within a period of one hundred eighty
days from the date of seizure by either confirming
or by setting aside such order, after giving an
opportunity of being heard to the representatives
of the Directorate of Enforcement and the
aggrieved person. Explanation.—While computing
the period of one hundred eighty days, the period
of stay granted by court shall be excluded and a
further period of at least thirty days shall be
granted from the date of communication of
vacation of such stay order.
(4) The order of the Competent Authority
confirming seizure of equivalent asset shall
continue till the disposal of adjudication
proceedings and thereafter, the Adjudicating
Authority shall pass appropriate directions in the
adjudication order with regard to further action as
regards the seizure made under sub-section (1):
Provided that if, at any stage of the
proceedings under this Act, the aggrieved person
discloses the fact of such foreign exchange,
foreign security or immovable property and brings
back the same into India, then the Competent
Authority or the Adjudicating Authority, as the
case may be, on receipt of an application in this
regard from the aggrieved person, and after
affording an opportunity of being heard to the
aggrieved person and representatives of the
Directorate of Enforcement, shall pass an
appropriate order as it deems fit, including setting
aside of the seizure made under sub-section (1).
(5) Any person aggrieved by any order passed by the
Competent Authority may prefer an appeal to the
Appellate Tribunal.
13
(6) Nothing contained in Section 15 shall apply to this
section.”
[Emphasis supplied]
26. A perusal of the aforesaid provision would
clearly indicate that the same has been enacted in
order to ensure that the assets of a person suspected
to be involved in foreign exchange or foreign security
violations may be seized to the extent equivalent to
such foreign exchange or foreign security, which may
be under scrutiny of the Adjudicating Authority.
27. Hence, the provision is in nature of a preventive
measure for ensuring that the assets equivalent to
the foreign exchange or foreign security may be kept
secured for future proceedings pursuant to
adjudication.
28. Sub-section (4) gives an impression that the
order passed by Competent Authority confirming the
seizure would remain alive only till the disposal of the
adjudication proceedings, and that the Adjudicating
Authority would be authorized to proceed with
further action, SCN, etc. without being fazed by
i.e.,
the confirmation of the seizure proceedings.
29. The effect of sub-section (4) is evidently to leave
the seized assets at the disposal of the Adjudicating
14
Authority for realisation of the adjudicated amount,
if any and to prevent frustration of the adjudication
order. However, sub-section (4) is restricted to an
order of the Competent Authority “ confirming seizure
of equivalent assets and the continuance thereof till
the disposal of the adjudication proceedings” . The
said provision literally does not deal with a situation
where the seizure has not been confirmed.
30. The controversy in the present cases is more
appropriately examined within the framework of sub-
sections (1) to (3) of Section 37A. A plain reading of
Section 37A(1) indicates that the power of seizure is
predicated upon the existence of a “reason to believe”
that foreign exchange, foreign security or immovable
property situated outside India is suspected to have
been held in contravention of Section 4. Such
satisfaction by the Authorised Officer at the stage of
preliminary seizure under Sub-section (1) is only
tentative and is expressly subject to scrutiny under
Sub-sections (2) and (3), wherein the Competent
Authority is required to independently examine
whether the reasons recorded justify continuation of
the seizure. The exercise undertaken by the
Competent Authority is thus not an empty formality,
15
but a substantive evaluation of whether the material
on record is sufficient to sustain even a prima facie
inference of contravention in relation to foreign
exchange. In the present case, upon such evaluation,
the Competent Authority declined to confirm the
seizure by a well-reasoned order, thereby indicating
that the material did not meet even this preliminary
threshold. The refusal to confirm the seizure,
therefore, reflects a considered finding that the
foundational requirement of a “reason to believe” was
not satisfied on the material available.
31. For the sake of convenience, the reasons
rd
recorded in the order dated 3 February, 2021,
whereby the Competent Authority refused to confirm
the seizure made under Section 37A(1) are extracted
below: -
“In this case none of the respondents i.e., R1
to R4 were holding any foreign security having a
value at any point of time. The subscribed shares
remained only in paper for the time being. None of
the documentary evidences in this matter have been
countered by the enforcement directorate. The
Enforcement Directorate has not proved by way of
evidence that the money indicated in the
"subscribed shares" have been paid either "legally or
illegally". As held by the Hon'ble SC, in the above
cited case law, the suspicion must be reasonable i.e.
have a degree of objectivity and basis/foundation for
16
the suspicion must be based on 'certain reasons'. In
my considered opinion, unless it is shown by the
investigating department that. "something" was
"held" in contravention of Section 4 of FEMA, Section
37A(1) will not come into play. In this case no share
of any value was held in Singapore. Therefore
suspicion has no foundation. As the department.
has failed to prove, Section 37A (1) of FEMA, 1999
cannot be invoked to seize the properties owned by
Mr. S. Jagathrakshakan (R1), Ms. Anusuya
Jagathrakshakan (R2), Ms. Sri Nisha (R3) & Mr.
Sundeep Aanand (R4). Therefore, the prayer made
by the authorised officer vide petition dated
05.10.2020 under Section 37A(2) to confirm the
seizure of properties as mentioned in the Annexures
A, B, C & D of the Order of Seizure dt.11.09.2020 is
rejected and the impugned Order of Seizure is set
aside.”
32. Thus, a prima facie satisfaction was recorded by
the Competent Authority that there was no evidence
of the appellants being involved in foreign security
transactions having any value. Consequently, it has
to be taken that there did not exist the “reasons to
believe” referred to in Sub-section (1) of Section 37A.
These findings definitely support the cause of the
appellants herein. It is not in dispute that the appeal
preferred by the Department against the order dated
rd
3 February, 2021, is still pending consideration.
The Division Bench of the High Court, while deciding
the writ appeal, observed that the writ petition
17
against the SCN is not entertainable. We feel that the
said observation may not be correct in every
situation. This Court has consistently held that
although ordinarily a writ petition against an SCN
may not be entertained, however, the said
proposition is not an inviolable rule. Interference at
the stage of SCN is permissible in exceptional
circumstances, such as where the notice suffers from
patent lack of jurisdiction, reflects non-application of
mind, is issued with a pre-determined or
premeditated approach, amounts to an abuse of the
process of law, or results in a violation of the
principles of natural justice. In such situations, the
High Court would be justified in exercising its
jurisdiction under Article 226 of the Constitution to
prevent manifest injustice. In this context, we may
gainfully refer to the following observations from
8
Union of India v. VICCO Laboratories : -
“ 31. Normally, the writ court should not interfere at
the stage of issuance of show-cause notice by the
authorities. In such a case, the parties get ample
opportunity to put forth their contentions before the
authorities concerned and to satisfy the authorities
concerned about the absence of case for proceeding
against the person against whom the show-cause
8
(2007) 13 SCC 270 : 2007 SCC OnLine SC 1420
18
notices have been issued. Abstinence from interference
at the stage of issuance of show-cause notice in order
to relegate the parties to the proceedings before the
authorities concerned is the normal rule. However, the
said rule is not without exceptions. Where a show-
cause notice is issued either without jurisdiction or
in an abuse of process of law, certainly in that case,
the writ court would not hesitate to interfere even
at the stage of issuance of show-cause notice. The
interference at the show-cause notice stage should be
rare and not in a routine manner. Mere assertion by
the writ petitioner that notice was without jurisdiction
and/or abuse of process of law would not suffice. It
should be prima facie established to be so. Where
factual adjudication would be necessary, interference
is ruled out.”
[Emphasis supplied]
33. Thus, the rejection of challenge laid by the
appellants to the SCN on the ground of non-
maintainability was not justified in the peculiar facts
of the case at hand.
34. We shall now advert to the observations made
by the Division Bench that the interim seizure under
Section 37A may not have any implication in respect
of the final order to be passed by the Adjudicating
Authority, and that it would be apposite for such
authority to deal with the effect and import of the
seizure order passed by the Authorised Officer under
Section 37A of FEMA while passing the final order
19
under Section 16 of FEMA. Further, in para 34, the
High Court again referred to the seizure made under
sub-section (1) and directed the Adjudicating
Authority to take note of the said provision. For ease
of reference, paras 32, 33, and 34 of the impugned
order are reproduced hereinbelow: -
“32. Therefore, the very purpose and object of
inserting Section 37A is to seize value equivalent
situated within India of such foreign exchange,
foreign security or immovable property during
pendency of the adjudication proceedings and such
seizer proceedings initiated under Section 37A,
undoubtedly cannot stand as a bar to proceed with
the adjudication proceedings under Section 16 of the
FEMA by the Adjudicating Authority. As noted under
the definition, the functions of the Adjudication
Authority, Authorised Officer and Competent
Authority are distinguishable and each Authority is
conferred with powers under the Act to carry out
certain actions. Therefore, the contention on behalf
of the appellants that the Authorised Officer is below
the Competent Authority has no relevance as far as
Section 37A of FEMA is concerned
33. In fine, we could arrive at an irresistible
conclusion that a writ against a show cause notice
is not entertainable. The adjudication proceedings
have completed and the final order is about to be
passed by the Adiudicating Authority. Regarding an
interim seizure under Section 37A is concerned, it
may not have any implication in respect of the final
order to be passed by the Adjudicating Authority and
it would be appropriate on his part to deal with the
effect of seizure order passed by the Authorised
20
Officer under Section 37A of FEMA, while passing
final order under Section 16 of FEMA.
34. The above position has been amply made clear
in Sub Section (4) to Section 37A of the Act, wherein,
it is contemplated that the Adjudicating Authority
shall pass appropriate directions in the adjudication
order with regard to further actions as regards to
seizer made under Sub Section (1) to Section 37A
and in this case, the Adjudicating Authority is
directed to take note of said provision and take an
appropriate decision with reference to the order
passed by the Authorised Officer under Section
37A(1) of the FEMA.”
35. On a bare perusal of the aforesaid observations,
we find that the High Court repeatedly referred to the
effect of the seizure order passed by the Authorised
Officer under Section 37A of FEMA and the scope of
consideration thereof by the Adjudicating Authority
while passing the final order under Section 16. We
may note that the observations (supra) made by the
Division Bench impliedly efface the findings recorded
by the Competent Authority while refusing to confirm
the seizure, thereby foreclosing the outcome of the
appeal pending before the appellate authority.
36. The High Court referred to sub-section (4) of
Section 37A as if it were concluding that the
seizure had been confirmed, whereas the factual
situation reads otherwise. In case the finding of the
21
Competent Authority refusing to confirm the seizure
for substantive reasons stands affirmed in appeal,
manifestly, the same would have a bearing on the
outcome of the adjudication proceedings.
37.
The Adjudicating Authority, while passing the
final order under Section 16 of FEMA, extensively
referred to and relied upon the aforesaid observations
of the Division Bench. The relevant conclusions from
th
the adjudication order dated 26 August, 2024 are
reproduced hereinbelow for ease of reference: -
“…..
(iii) The above analysis was strengthened by the
Hon'ble High Court of Madras in judicial
pronouncement dated 30.11.2023 in the matter of
Writ Petitions in WP Nos. 21105/2023,
21359/2023, 21100/2023, 21096/2023 and
21102/2023, filed by the Noticees against the
Adjudicating Authority, and as such, the Hon'ble
High Court was pleased to dismiss the Writ Petitions
(iv) The Noticees preferred Writ Appeal against the
order of Hon'ble High Court of Madras in the above
WPs. The Division Bench of Hon'ble High Court of
Madras vide its order dated 23.07.2024 in the Writ
Appeals in WA No.s 3520 to 3524 of 2023 has
observed that:
"31. We concur with the learned Additional
Solicitor General of India, in view of the fact
that the special provision under Section 37A is
all about an interim seizer value equivalent
situated within in India of such foreign
22
exchange, foreign security or immovable
property. In the event of seizer during the
pendency of the adjudication proceedings, the
procedures to be followed by the authority are
enumerated under Sub Section (6) of Section
37A of FEMA.
32. Therefore, the very purpose and object of
inserting Section 37A is to seize value
equivalent situated within India of such foreign
exchange, foreign security or immovable
property during pendency of the adjudication
proceedings and such seizer proceedings
initiated under Section 37A, undoubtedly
cannot stand as a bar to proceed with the
adjudication proceedings under Section 16 of
the FEMA by the Adjudicating Authority. As
noted under the definition, the functions of the
Adjudication Authority, Authorized Officer and
Competent Authority are distinguishable and
each Authority is conferred with powers under
the Act to carry out certain actions. Therefore,
the contention on behalf of the appellants that
the Authorised Officer is below the Competent
Authority has not relevance as far as Section
37A of FEMA is concerned."
As such, the Division upheld the Single Bench
Order of Hon'ble High Court of Madras on
23.07.2024 and dismissed the Writ Appeals.
(v) …..
(vi) The Competent Authority has passed an
Order setting aside the Seizure Order dated
11.09.2020, vide his order Petition No. 01/2021
dated 03.02.2021. Having perused the said
order of the Competent Authority, I find that
Section 4 of FEMA has been mis-interpreted
holding that the terms acquire, hold, own,
23
possess or transfer of foreign security were only
in respect of paid-up shares. I find that the
Competent Authority has not considered the
observations from the Financial Statement of
the overseas entity, showing the shares as fully
paid-up. In terms of Section 4 of FEMA, the act
of holding of foreign security is sufficient, and
it does not mandate that the foreign securities
are necessarily paid up. FEMA defines the term
"Direct Investment Outside India" that the
investment means by way of contribution to the
capital or subscription to the Memorandum of
Association of a Foreign entity or by way of
purchasing existing shares of a foreign
entity...... However, in the case on hand, during
the impugned period the Noticees were holding
shares of M/s. Silver Park International Pte. Ltd.
Singapore, and also that the said shares were
fully paid-up.
(vii) It is observed from the Reserve Bank of India -
Frequently Asked Questions, that RBI while
clarifying "whether an Indian Party/resident Indian
acquire shares of a Foreign entity without upfront
payment or on deferred payment basis" clarified that
"No. The provisions of Notification No. FEMA
120/RB-2004 dated July 7th 2004 as amended from
time to time, do not permit acquisition of foreign
shares without payment or deferred payment basis."
In view of the above, it is obvious that the Noticees
have acquired Foreign Shares of M/s. Silver Park
International Pte. Ltd. without obtaining prior RBI
approval to make Direct investment outside India.
From the above, it is obvious that the Noticees have
acquired and held foreign shares in violation of
Section 4 of FEMA.
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(viii) However, I find that the Competent
Authority, without considering the above
statutory stand points, has passed Order setting
aside the Seizure Order of the Authorized
Officer. Therefore, I do not concur with the order
of the Competent Authority. As such, I find that
the impugned seized properties are in
accordance with the provisions of Section 37A
of FEMA .”
[Emphasis supplied]
38. In effect, the Adjudicating Authority has undone
the order of the Competent Authority even while the
appeal against the said order is pending. Such a
course of action, in the opinion of this Court,
tantamounts to abdicating the powers of the
Appellate Authority, even when the order of the
Competent Authority was still under challenge in
appeal at the instance of the department.
39. In wake of the above discussion, we are of the
rd
opinion that the impugned order dated 23 July,
2024 passed by the Division Bench of the High Court
and so also the order of the learned Single Judge of
th
the High Court dated 30 November, 2023, rejecting
the writ petition preferred by the appellants and as
th
a consequence, the final order dated 26 August,
2024 passed by the Adjudicating Authority imposing
penalty and ordering confiscation of the property held
25
by appellants are declared to be arbitrary and
contrary to law. The same are hereby set aside. The
proceedings are revived from the stage of the SCN.
40. As an upshot, we provide that the Appellate
Authority shall first decide the appeal preferred by
the Department against the order of the Competent
Authority under Section 37A(5) of FEMA after hearing
the parties and by passing a reasoned order within a
period of two months from today. Pursuant to the
disposal of the appeal pending before the Appellate
Authority, the proceedings arising out of the SCN
may be commenced and shall be taken to their logical
conclusion without being prejudiced by any of the
observations made hereinabove or in the orders
passed by the High Court.
41. The appeals are disposed of in these terms.
42. Pending application(s), if any, shall stand
disposed of.
….……………………J.
(VIKRAM NATH)
...…………………….J.
(SANDEEP MEHTA)
NEW DELHI;
APRIL 01, 2026.
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